Sunday, 13 July 2014

Financial Tips Corliss Group online magazine: Here’s How to Navigate the Noise and Find the Best Market Tips

There’s
a whole lot of noise out there in financial
media these days. Investing blogs are everywhere, CNBC and Fox Business
Network broadcast investing advice 24 hours a day, and even when the U.S.
market is closed there’s some issue in an emerging market that threatens to
affect stocks at the next opening bell.

So
how can you make sense of this, tuning out the noise and tuning into the
information that matters?

Jeff
Macke — the current host of Breakout on Yahoo Finance and one of the founding
fathers of CNBC’s Fast Money —
recently penned a book to help you do just that.

His
book, Clash of the Financial Pundits (available here on Amazon and co-written
by fellow pundit Josh Brown), is an exploration of how pundits make calls and
sometimes even move markets.

But
it’s also a guide into how financial media works, what makes pundits tick and
how individual investors can better use the information at their disposal to
make more money.

The
book’s most valuable section, in my opinion, includes these tips on examining
pundits, offered by Jeff Macke and Josh Brown:

1. Who is this expert, and what firm or
organization does he represent?

2. What does her professional affiliation
mean in terms of the opinions she’s sharing?

3. Does he have the same time frame or
investment objectives that I do?

4. How many ideas is she generating each
day or week? How much thought is going into each one?

5. What are the consequences for him if he
is wrong? Will we ever hear more about this idea in a follow-up?

6. How does the opinion I’ve just heart
relate to my own portfolio or investing goals? Is there any real relevance?

7. Why am I reading or listening to this
in the first place? Intellectual curiosity? Entertainment? Or do I have an
actual need to employ this sort of information?

8. Is there a publicly available archive
of this person’s previous opinions and forecasts? Have they been mostly
accurate or mostly wrong? What were the driving factors behind the accuracies
or the great calls? Luck? Skill? Good timing? Strong research? Some combination
of these elements?

I
love this list. And the only thing I would add to it is:

Buy
Clash of the Financial Pundits, both to improve your media literacy and to have
a better understanding of just how the financial advisory business
works.

A
Conversation With the Author

Author
Jeff Macke has a lot of great advice on how to navigate both the markets and
financial media. But mostly, his advice centers around embracing personal
responsibility and the imperfection that is inherent with investing.

“Your
goal is not to really become a master of investing or trading, it’s to be able
to become at least up to the level where you know what you don’t know and you
don’t get yourself in trouble,” Macke told me last week via telephone. “Don’t
do things like day trade the hot IPOs, or pay more commissions than you should,
or stay uninvested because you’re just going to sit on the sidelines with 50%
cash and wait for a pullback, or start thinking things like the market should
do something or else.

“You
have to be an informed investor and ask the right questions, but it doesn’t
mean answering everything yourself.”

Asking
the right questions doesn’t just involve searching for the best big investment
opportunity, either, but also searching for the right place to get your
financial news.

“‘Consider
the source’ is rule No. 1, whether you’re on the playground or watching
television or whatever you’re doing,” Macke said. “For some reason there’s this
void in understanding of financial media that it’s a product. That, when people
would criticize CNBC on the up days for being a bunch of cheerleaders … that’s
a ludicrous criticism; It’s a television network. It’s being run by people who
are not finance majors who are not even necessarily CFAs, and it’s being
produced like a television show is produced like MSNBC, like Fox News, like all
of them are produced — by generally younger people who are getting on the phone
and calling folks who can articulate their ideas in friendly soundbites and
look good doing it.”

In
other words, Macke said, if you’re blaming the pundits for leading you astray …
you should probably look in the mirror instead.

“The
people who are harshest on pundits usually have a problem with their own level
of accountability,” he said.

The
trick is to understand that being personally accountable does not mean being
perfect. You will be wrong sometimes, but that’s OK. After all, even the
greatest investors get it wrong — and in the book, Macke has some great
conversations with pundits from Jim Cramer to Jim Rogers to Ben Stein about
their mistakes and how they learned from them.

In
fact, making mistakes gracefully — and honestly — is actually a more important
quality than most think.

“The
commonality, the theme that runs through each of the conversations is that
these people have been wrong, they’ve made mistakes and they’ve learned
something from it,” Macke said. “If you’re in the business of judging the
pundits, look at the ones who have handled mistakes and how they’ve gone about
their process and how it has changed them — to be wrong or right in public.
That will tell you a lot about whether or not you want to listen to them.”

So
if you’re willing to make some mistakes, how should you invest right now?

“If
you’re in this game, you’re just going to have to concede the fact you’re going
to want to take a couple flyers in there. Well, put 10% of your portfolio away
and do that, knock yourself out,” Macke said. “If you truly believe and feel
like you understand two or three companies, then create your own little
portfolio.

“But
your staples, your main food, you’re kind of bread and water should be index
funds. That should be your core position — long the S&P 500 — because man,
it is tough to beat.”